The Reserve Bank of India (RBI) has permitted banks with IFSC Banking Units (IBUs) to offer non-deliverable derivative contracts (NDCC) involving the Indian rupee to resident users in the onshore market.
According to the RBI, this move seeks to develop the onshore INR-NDDC market and to provide residents with the flexibility to efficiently design their hedging programmes
Also read: Highlights of RBI’s monetary policy statement
“This measure will further deepen the forex market in India and provide enhanced flexibility to residents in meeting their hedging requirements,” RBI Governor Shaktikanta Das said in his policy outcome statement.
From June 01, 2020 onwards, banks which operate IBUs are permitted to transact in rupee non-deliverable foreign exchange derivative contracts (NDDCs) with non-residents and with each other.
“Banks will have the flexibility of settling their NDDC transactions with non-residents and with each other in foreign currency or in INR while transactions with residents will be mandatorily settled in INR,” RBI said.
The central bank will separately issue related directions on the same.